NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOr
the NINE MONTHS ended SEPTEMBER 30, 2016 and 2015
|
1.
|
ORGANIZATION AND BUSINESS
|
American Education Center, Inc.
(“AEC New York”) is a New York Corporation organized on November 8, 1999 and is licensed by the Education Department
of the State of New York to engage in education related consulting services between the United States and China.
On May 7, 2014, the President/sole
shareholder of AEC New York formed a new company (“AEC Nevada”) in the State of Nevada with the same name. On May 31,
2014, the President/sole shareholder of AEC New York exchanged his 200 shares for 10,563,000 shares of AEC Nevada. This exchange
made AEC New York a wholly owned subsidiary of AEC Nevada, collectively the “Company.”
The Company’s primary goal
is to build upon the concept of “one-stop comprehensive services” for international students, educators, and institutions.
The Company has been devoted to international education exchanges, by providing educational and career enrichment opportunities
for students, teachers, and educational institutions between China and the United States. The Company currently provides admission,
visa, housing and other consulting services to Chinese students wishing to study in the United States. The Company also provides
exchange and placement services for qualified United States educators to teach in China. In addition, the Company provides localization
consulting services which are for employees coming to the United States to work for multi-national companies with operations here.
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Basis of Accounting and Presentation
The unaudited interim financial
statements of the Company as of September 30, 2016 and for the three and nine months ended September 30, 2016 and 2015, have been
prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the
rules and regulations of the Securities and Exchange Commission (the “SEC”) which apply to interim financial statements.
Accordingly, they do not include all of the information and footnotes normally required by accounting principles generally accepted
in the United States of America for annual financial statements. In the opinion of management, such information contains all adjustments,
consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the periods presented. The
results of operations for the three and nine months ended September 30, 2016 are not necessarily indicative of the results to be
expected for future quarters or for the year ending December 31, 2016.
AMERICAN
EDUCATION CENTER, Inc. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOr
the NINE MONTHS ended September 30, 2016 and 2015
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
Basis of Accounting and Presentation
(continued)
The accompanying consolidated financial
statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in
the United States of America (“GAAP”). The consolidated financial statements are comprised of AEC Nevada and its wholly
owned subsidiary, AEC New York. All significant intercompany accounts and transactions have been eliminated in consolidation.
Cash and Cash Equivalents
The Company considers all liquid
investments with an original maturity of three months or less to be cash equivalents.
Accounts Receivable
The Company carries its accounts
receivable at cost less an allowance for doubtful accounts if required. On a periodic basis, management evaluates accounts receivable
balances and establishes an allowance for doubtful accounts, based on history of past write-offs and collections, when necessary.
As of September 30, 2016, the Company considers all accounts receivable to be fully collectible and, therefore, did not provide
for an allowance for doubtful accounts.
Revenue Recognition
Revenue
is recorded pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
605,
Revenue Recognition
, when persuasive evidence of an arrangement exists, delivery of the services has occurred, the
fee is fixed or determinable and collectability is reasonably assured.
The Company
offers a limited refund policy to students who have received consulting services regarding their H1B visas. Services for H1B consulting
are prepaid. The Company prepares the filing for the visas for $2,000, which is non-refundable. If the visa application is accepted,
the remaining prepayment will be recognized as revenue, if not, the remaining prepayment is refunded. The unearned prepaid advances
are shown as “advances from clients” in the consolidated balance sheets.
AMERICAN
EDUCATION CENTER, Inc. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOr
the NINE MONTHS ended September 30, 2016 and 2015
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
Concentration of Credit and Business
Risk
The Company maintains its cash accounts
at 3 commercial banks. The Federal Deposit Insurance Corporation (“FDIC”) insures up to $250,000 per bank for the total
of all depository accounts. At September 30, 2016, there were no cash balances in excess of the FDIC insured limits.
The following table represents certain
information about the Company’s major customers which individually accounted for more than 10% of the Company’s gross
revenue for the nine months ended September 30:
|
|
2016
|
|
|
|
Gross Revenue
|
|
|
Percentage
|
|
|
Accounts
Receivable
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer 1
|
|
$
|
814,000
|
|
|
|
16.7
|
%
|
|
$
|
-
|
|
|
|
-
|
|
Customer 2
|
|
|
1,271,590
|
|
|
|
26.1
|
%
|
|
|
218,650
|
|
|
|
27.4
|
%
|
|
|
2015
|
|
|
|
Gross Revenue
|
|
|
Percentage
|
|
|
Accounts
Receivable
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer 1
|
|
$
|
825,050
|
|
|
|
18.0
|
%
|
|
$
|
210,000
|
|
|
|
26.3
|
%
|
AMERICAN
EDUCATION CENTER, Inc. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
Stock-Based Compensation
The fair value of stock options
issued to third party consultants and to employees, officers and directors are recorded in accordance with the measurement and
recognition criteria of FASB ASC 505-50,
Equity-Based Payments to Non-Employees
and FASB ASC 718,
Compensation –
Stock Based Compensation
, respectively.
The options are valued using the
Black-Scholes valuation method. This model is affected by the Company’s stock price as well as assumptions regarding a number
of subjective variables. These subjective variables include, but are not limited to the Company’s expected stock price volatility
over the expected term of the awards, and actual and projected stock option exercise behaviors.
Because the Company’s stock
options have characteristics different from those of its traded stock, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of such stock.
Income Taxes
The Company accounts for income
taxes in accordance with FASB ASC 740,
Income Taxes
(“ASC 740”), which requires the recognition of deferred
income taxes for differences between the basis of assets and liabilities for financial statement and income tax purposes. Deferred
tax assets and liabilities represent the future tax consequences for those differences, which will either be taxable or deductible
when the assets and liabilities are recovered or settled. Deferred taxes are also recognized for operating losses that are available
to offset future taxable income. A valuation allowance is established when necessary to reduce deferred tax assets to the amount
expected to be realized.
ASC 740 also addresses the determination
of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under
ASC 740, the Company may recognize the tax benefit from an uncertain tax position only if it is “more likely than not”
that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.
The tax benefits recognized in the financial statements from such a position would be measured based on the largest benefit that
has a greater than 50% likelihood of being realized upon ultimate settlement. ASC 740 also provides guidance on derecognition of
income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, and accounting for
interest and penalties associated with tax positions. As of September 30, 2016 and December 31, 2015, the Company does not have
a liability for any unrecognized tax benefits.
AMERICAN
EDUCATION CENTER, Inc. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
Fair Value of Financial Measurements
FASB ASC 820,
Fair Value Measurement
,
specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other
market participants would use based upon market data obtained from independent sources (observable inputs). In accordance with
ASC 820, the following summarizes the fair value hierarchy:
Level 1 Inputs –
|
Unadjusted quoted market prices for identical assets and liabilities in an active market that the Company has the ability to access.
|
|
|
Level 2 Inputs –
|
Inputs other than the quoted prices in active markets that are observable either directly or indirectly.
|
|
|
Level 3 Inputs –
|
Inputs based on prices or valuation techniques that are both unobservable and significant to the overall fair value measurements.
|
FASB ASC 820 requires the use of
observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different
levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that
is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize
the use of unobservable inputs.
The Company did not identify any
assets or liabilities that are required to be presented at fair value on a recurring basis. Non-derivative financial instruments
include cash, accounts receivable, prepaid expenses, accounts payable and accrued expenses, loan from stockholder and advances
from clients. As of September 30, 2016 and December 31, 2015, the carrying values of these financial instruments approximated their
fair values due to their short term nature.
Use of Estimates
The preparation of financial statements
in accordance with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual
results could differ from those estimates.
AMERICAN
EDUCATION CENTER, Inc. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
Earnings (Loss) per Share
The Company computes net income
(loss) per common share in accordance with FASB ASC 260,
Earnings Per Share
(“ASC 260”). Under the provisions
of ASC 260, basic net income (loss) per common share is computed by dividing the amount available to common stockholders by the
weighted average number of shares of common stock outstanding during the period.
Diluted earnings per share is based
on the assumption that all dilutive convertible shares and stock options are converted or exercised. Dilution is computed by applying
the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or
at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price
during the period. The Company’s common stock equivalents were excluded in the computation of diluted net (loss) per share
since their inclusion would be anti-dilutive. Basic and diluted shares outstanding are the same for the three and nine months ended
September 30, 2015 and 2016. Total shares issuable upon the exercise of all outstanding stock options for the nine months ended
September 30, 2016 and 2015 were as follows:
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Common stock equivalents – stock options
|
|
|
2,200,000
|
|
|
|
-
|
|
|
3.
|
RECENTLY ISSUED ACCOUNTING STANDARDS
|
In February 2016, the FASB issued
Accounting Standards Updates (“ASU”) 2016-02,
Leases
. The new standard establishes a right-of-use (“ROU”)
model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer
than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense
recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including
interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and
operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial
statements, with certain practical expedients available. We are currently evaluating the impact of our pending adoption of the
new standard on our financial statements.
AMERICAN
EDUCATION CENTER, Inc. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
|
3.
|
RECENTLY ISSUED ACCOUNTING STANDARDS (continued)
|
In August 2014, the FASB issued
ASU 2014-15,
Presentation of Financial Statements-Going Concern (Subtopic 205-40):
Disclosure of Uncertainties about
an Entity’s Ability to Continue as a Going Concern.
ASU 2014-15 provides guidance in GAAP about management’s responsibility
to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related
footnote disclosures. In doing so, the amendments should reduce diversity in the timing and content of footnote disclosures. The
amendments in ASU 2014-15 are effective for the annual period ending after December 15, 2016, and for annual periods and interim
periods thereafter. Early application is permitted. This accounting standard update is not expected to have a material impact on
the Company’s financial statements.
In May 2014, the FASB issued ASU
2014-09,
Revenue from Contracts with Customers
, which supersedes the revenue recognition requirements in ASC 605,
Revenue
Recognition
. The core principle of this updated guidance is that an entity should recognize revenue to depict the transfer
of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled
in exchange for those goods or services. The new rule also requires additional disclosure about the nature, amount, timing and
uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments
and assets recognized from costs incurred to obtain or fulfill a contract. This guidance, after amendment is effective for annual
reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Companies are permitted
to adopt this new rule following either a full or modified retrospective approach. Early adoption is not permitted. This accounting
standard update is not expected to have a material impact on the Company’s financial statements.
The Company has security deposits
with the landlords of $266,021 as of September 30, 2016 and December 31, 2015.
The Company
receives advance payments for services to be performed and recognizes deferred revenue when the services have been rendered. The
deferred revenue at September 30, 2016 and December 31, 2015 was $0 and $553,624, respectively.
AMERICAN
EDUCATION CENTER, Inc. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
The services
for H1B visas require prepayment to the Company which has been shown as advances from clients on the balance sheets.
The advances
from clients at September 30, 2016 and December 31, 2015 were $157,469 and $63,679, respectively. The Company has received all
the results on the 2016 H1B applications as of September 30, 2016, revenue was recognized for the cases selected, all remaining
advances will be refunded by the end of 2016.
|
7.
|
RELATED-PARTY TRANSACTIONS
|
The loan from stockholder represents
an unsecured non-interest bearing loan, arising from expenses paid on behalf of the Company. The loan is due on demand.
The Company’s President/Chairman/Chief
Financial Officer/Secretary has a 34% interest in Columbia International College, Inc. (“CIC”). In the normal course
of business, the Company conducts certain transactions with CIC. Included in accounts receivable is an amount due from CIC of $21,500
as of September 30, 2016 and December 31, 2015. The Company paid $25,000 and $245,000 for consulting services to CIC for the three
and nine months ended September 30, 2016, respectively.
On December 1, 2014, a third party,
who is also a client, loaned the Company $295,579, with interest at 10%. The loan is to be repaid on December 13, 2019. Interest
will be paid on the last day of each quarter from 2015 to 2019, except for the last payment on December 12, 2019. The Company paid
the interest for the first, second, and third quarter at the end of December, 2015. The Company paid the interest for the fourth
quarter of 2015 in January 2016, which created a technical default for late payment. A waiver was issued on March 23, 2016 to waive
this default. The Company paid the interest for each of the three months periods ended March 31, 2016, June 30, 2016 and September
30, 2016. Interest expense for the three and nine months ended September 30, 2016 and 2015 was $7,398, $22,167, $7,949, and $24,519,
respectively.
AMERICAN
EDUCATION CENTER, Inc. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
In December 2014, the Company entered
into a lease for office space with an unrelated party, expiring on July 31, 2025. The lease was to commence on December 11, 2014,
however, due to renovation issues, the lease was changed and commenced on March 1, 2015 and the Company received two months of
free rent. Due to free rent and escalating monthly rental, utilities, real estate taxes, insurance and other operating expenses,
the lease has been straight-lined for financial statement purposes which created deferred rent as shown on the balance sheets.
In November 2015, the Company entered into a sublease agreement to lease space to an unrelated third party for a monthly rental
of $3,000 for the first three months and $1,500 for the remainder of the lease term. The sublease commenced on December 1, 2015
and expires on November 30, 2016. In November 2015, the Company entered into another sublease agreement to lease space to an unrelated
third party for a monthly rental of $20,000. The sublease commenced on April 1, 2016 and expires on March 31, 2017. The sublease
income will be netted against the Company’s rent expense. The future rent income to be received in 2016 and 2017 will be
$60,120 and $60,120, respectively. Rent expense, net of sublease income, was approximately $33,000, $168,000, $153,000 and $381,000
for the three and nine months ended September 30, 2016 and 2015, respectively.
Future minimum lease commitments
are as follows:
Year Ending December 31,
|
|
Amount
|
|
|
|
|
|
2016
|
|
$
|
360,606
|
|
2017
|
|
|
369,621
|
|
2018
|
|
|
378,862
|
|
2019
|
|
|
388,333
|
|
2020
|
|
|
418,604
|
|
Thereafter
|
|
|
2,105,734
|
|
|
|
|
|
|
Total
|
|
$
|
4,021,760
|
|
AMERICAN
EDUCATION CENTER, Inc. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
The component of deferred tax assets
at September 30, 2016 and December 31, 2015 is as follows:
|
|
September 30,
2016
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
|
|
Net operating loss carry forwards
|
|
$
|
73,719
|
|
|
$
|
-
|
|
The (benefit) provision for income
taxes for the three and nine months ended September 30 consist of the following:
|
|
Three Months Ended, September 30,
|
|
|
Nine Months Ended, September 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
(19,101
|
)
|
|
$
|
(44,365
|
)
|
|
$
|
(19,051
|
)
|
|
$
|
(13,813
|
)
|
Deferred
|
|
|
(56,927
|
)
|
|
|
(3,587
|
)
|
|
|
(73,719
|
)
|
|
|
91,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(76,028
|
)
|
|
$
|
(47,952
|
)
|
|
$
|
(92,770
|
)
|
|
$
|
77,251
|
|
The Company’s tax returns
are subject to examination by the federal, state and city taxing authorities. The 2012, 2013, 2014 and 2015 tax years are open
and subject to examination by the taxing authorities. The Company is not currently under examination nor have they been notified
by the authorities.
AMERICAN
EDUCATION CENTER, Inc. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
|
10.
|
Income taxes
(continued)
|
A reconciliation of the (benefit)
provision for income taxes, with the amount computed by applying the statutory Federal income tax rate for the three and nine months
ended September 30 is as follows:
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax at federal statutory rate
|
|
|
34.0
|
%
|
|
|
(34.0
|
)%
|
|
|
34.0
|
%
|
|
|
(34.0
|
)%
|
State and local taxes, net of federal benefit
|
|
|
10.8
|
|
|
|
(10.8
|
)
|
|
|
10.8
|
|
|
|
(10.8
|
)
|
Valuation allowance
|
|
|
-
|
|
|
|
44.8
|
|
|
|
-
|
|
|
|
44.8
|
|
Changes in tax reserves
|
|
|
14.6
|
|
|
|
0.0
|
|
|
|
7.7
|
|
|
|
0.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
59.4
|
%
|
|
|
0
|
%
|
|
|
52.5
|
%
|
|
|
0
|
%
|
AMERICAN
EDUCATION CENTER, Inc. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
On November 2015, the Board of Directors
(the “Board”) adopted an Equity Incentive Plan (“Plan”). The purpose of the Plan is to attract, retain
and motivate employees, directors and persons affiliated with the Company and to provide such participants with additional incentive
and reward opportunities. The awards may be in the form of incentive stock options and non-qualified stock options. The accumulated
number of shares of stock reserved for issuance as of September 30, 2016 and December 31, 2015 are 2,200,000 and 400,000, respectively.
On November 27, 2015, the Company
granted to two third party consultants, options to purchase 100,000 and 300,000 shares of common stock, respectively. For the 100,000
stock options, 40,000 options vest on July 1, 2016 and expire on June 30, 2021 with an exercise price of $1.00 per share; 30,000
options vest on July 1, 2017 and expire on June 30, 2022 with an exercise price of $2.00 per share; and 30,000 options vest on
July 1, 2018 and expire on June 30, 2023 with an exercise price of $3.00 per share. For the 300,000 stock options, 100,000 options
vest on July 1, 2016 and expire on June 30, 2021 with an exercise price of $1.00 per share; 100,000 options vest on July 1, 2017
and expire on June 30, 2022 with an exercise price of $2.00 per share; 100,000 options vest on July 1, 2018 and expire on June
30, 2023 with an exercise price of $3.00 per share.
Weighted average assumptions used
to estimate the fair value of stock options on the date of grant are as follows:
|
|
November 17, 2015
|
|
|
|
|
|
Expected dividend yield
|
|
$
|
-
|
|
Expected stock price volatility
|
|
|
0.01
|
%
|
Risk free interest rate
|
|
|
0.32
|
%
|
Expected life (years)
|
|
|
5 years
|
|
On June 30, 2016, the Company approved
the issuance of non-qualified stock options for the purchase of an aggregate of 1,500,000 shares of common stock to certain employee
and persons affiliated with the Company. 500,000 options vest on July 1, 2017 and expire on June 30, 2022 with an exercise price
of $1.00 per share; 500,000 options vest on July 1, 2018 and expire on June 30, 2023 with an exercise price of $2.00 per share;
500,000 options vest on July 1, 2019 and expire on June 30, 2024 with an exercise price of $3.00 per share.
AMERICAN
EDUCATION CENTER, Inc. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
|
11.
|
STOCK OPTIONS (continued)
|
Weighted average assumptions used
to estimate the fair value of stock options on the date of grant are as follows:
|
|
June 30, 2016
|
|
|
|
|
|
Expected dividend yield
|
|
$
|
-
|
|
Expected stock price volatility
|
|
|
0.01
|
%
|
Risk free interest rate
|
|
|
0.32
|
%
|
Expected life (years)
|
|
|
5 years
|
|
On August 29, 2016, the Company
approved the issuance of non-qualified stock options for the purchase of an aggregate of 300,000 shares of common stock to an employee
of the Company. 100,000 options vest on August 29, 2017 and expire on August 28, 2022 with an exercise price of $2.00 per share;
100,000 options vest on August 29, 2018 and expire on August 28, 2023 with an exercise price of $3.00 per share; 100,000 options
vest on August 25, 2019 and expire on August 28, 2024 with an exercise price of $4.00 per share.
Weighted average assumptions used
to estimate the fair value of stock options on the date of grant are as follows:
|
|
August 29, 2016
|
|
|
|
|
|
Expected dividend yield
|
|
$
|
-
|
|
Expected stock price volatility
|
|
|
0.01
|
%
|
Risk free interest rate
|
|
|
0.32
|
%
|
Expected life (years)
|
|
|
5 years
|
|
AMERICAN
EDUCATION CENTER, Inc. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
|
11.
|
STOCK OPTIONS (continued)
|
The Company will issue new shares of common stock upon
the exercise of outstanding stock options. The following is a summary of stock option activity:
|
|
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted-
Average
Remaining
Contractual
Life
|
|
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2015
|
|
|
400,000
|
|
|
$
|
2.32
|
|
|
|
6.82 years
|
|
|
$
|
-
|
|
Granted
|
|
|
1,800,000
|
|
|
|
2.54
|
|
|
|
7.10 years
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Cancelled and expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2016
|
|
|
2,200,000
|
|
|
$
|
2.50
|
|
|
|
6.92 years
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at September 30, 2016
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at September 30, 2016
|
|
|
140,000
|
|
|
$
|
1.00
|
|
|
|
5.50 years
|
|
|
$
|
-
|
|
The aggregate intrinsic value is
calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common
stock. There were no options exercised during the three and nine months ended September 30, 2016.
The estimated fair value of these
options was $0 for the three and nine months ended September 30, 2016 and 2015, respectively.
AMERICAN
EDUCATION CENTER, Inc. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
|
12.
|
ISSUANCE OF COMMON STOCK
|
During the nine months ended September
30, 2016, the Company issued 1,550,000 shares of common stock at $0.01 per share and 800,000 shares of common stock at $0.1 per
share, respectively, for the exchange of consulting services from unrelated third parties
.
The Company’s management
has performed subsequent events procedures through November 14, 2016, which is the date the consolidated financial statements
were available to be issued. There were no subsequent events requiring adjustment to or disclosure in the consolidated
financial statements.